Chad Weigand, Market Analyst, U.S. Wheat Associates
Increased world production will lead to record wheat supplies in the upcoming marketing year, according to the U.S. Department of Agriculture (USDA). In its initial 2011/2012 World Agricultural Supply and Demand Estimates (WASDE), UDSA pegged global wheat production at 670 million metric tons (MMT), a 3 percent increase from 2010/2011. Combined with beginning stocks of 182 MMT, global supplies would reach an estimated 852 MMT, up 7.4 MMT from 2010/2011 and just above the previous record of 850 MMT set in 2009/2010.
While exporter supplies are likely to increase in 2011/2012, this will depend on greater production from the Black Sea, Canada and the European Union. Russia’s 2010/2011 ending stocks are down sharply to 5.6 MMT, a 54 percent decline from last year. Russian production should increase from last year’s 41.5 MMT, but at a projected 53 MMT, production will still be well below the 61.8 MMT produced in 2009/2010.
USDA projected Canadian production to reach 26 MMT, a 12 percent increase from 2010/2011. However, Canada’s production potential will depend on drier weather in the next few weeks as planting remains well behind schedule. The Canadian Wheat Board reported this week that western Canadian planting is 3 percent complete, compared to an average of 40 percent. Canada will begin the new marketing year with below average stocks estimated at 6.2 MMT, down 12 percent from the five-year average.
With the European Union’s carryover stocks falling by 27 percent from last year, EU production will have to reach USDA’s estimate of 139 MMT in 2011/2012 to match last year’s supplies of 156 MMT. USDA estimated the European Union’s beginning stocks at 11.7 MMT, their lowest level since 2004/2005 and 31 percent below the five-year average.
Projected U.S. output of 55.6 MMT is down 8 percent from 2010/2011, but large carryover stocks will ensure above-average supplies. At 22.8 MMT, beginning stocks are at the second highest level since 2001/2002 and well above the five-year average of 16.1 MMT. USDA forecasted U.S. supplies to reach 81.4 MMT, down 9 percent from 2010/2011 but still 4 percent more than the five-year average.
Increased exporter supplies will be needed to meet ever-growing demand for wheat. USDA expects global demand to reach 670 MMT in 2011/2012, setting a record for the fourth consecutive year. Global trade is currently projected to rise by 2 percent from 2010/2011, reaching 127 MMT.
To read the latest WASDE report, please visit http://www.usda.gov/oce/commodity/wasde/latest.pdf.